The SEZ (Special Economic Zones) and Tax Incentives offered as per the SEZ policy of India are tempting for both domestic and foreign investors. The SEZ and Tax Incentives offered covers areas like state and local taxes, levies, stamp duty and other duties.
What is SEZ?
Special Economic Zone – SEZ’s are the areas of the country in which there is great need of development. So the government has notified such areas a deemed foreign territory and the purchases made from such place will be considered as imports and the sales made to this field would be counted as exports. The primary target to give relaxation to SEZ is to promote exports.
There are many benefits of setting up of SEZ such as the development of the backward place, creation of employment, and infrastructure economy will grow, foreign and domestic investment, promotion of goods and services, acts, etc.
In states like Gujarat, Madhya Pradesh, Haryana, Punjab, West Bengal and Tamil Nadu this act is applicable.
SEZ Benefits – Special Economic Zone Tax Benefits
Let us take a look at Special Economic Zone Tax Benefits here.
Service Tax is entirely exempt to the SEZ(Special Economic Zone). The services received throughout the year should be utilized for the purpose of SEZ only and nowhere else. If the services received are partly used for SEZ and partly used for some other purpose than half service tax can be claimed as the refund from the authority. The other regulatory requirements are that the approval committee should approve them and should fill the Form A-1 in prescribed time limit.
Must Read: Service Tax Overview
VAT/ Local Sales Tax
- Section 50 of the SEZ Act of India, authorizes all the concerned State Governments to issue notifications allowing exemptions to entrepreneur or developer on state taxes, levies, and duties.
- Special Economic Zone Rule 5(5) of India provides that before recommendation of any proposal for the establishment of an SEZ, the State Govt should offer various incentives. These incentives including exemption from state and local taxes, stamp duty, levies, other duties and taxes levied by local bodies on goods required for operations of such authorized unit.
- Therefore, the Special Economic Zone Act and the Rule of India involves all the state governments with the clear indication of incentives offered as per the respective state policy.
Must Read: Value Added Tax Overview
Central Sales Tax
- According to the Section 8 (6) of the Central Sales Tax Act India, all inter-state sale of goods made by a dealer to a registered deal is exempted from Central Sales Tax. The sale of good is done for the purpose of setting up, manufacture, operation, production, processing, maintenance, assembling, trading, repairing, reconditioning, re-engineering, packaging or for use as packing material or packing accessories in any SEZ unit for operation, maintenance and development of Special Economic Zone developer.
- The following benefit is offered if such registered dealer is authorized to establish such a unit within the designated SEZ.
Must Read: Central Sales Tax-CST
SEZ Incentives & Facilities
- Duty-free import or domestic procurement of goods for development, operation, and maintenance of Special Economic Zone units.
- Exemption from minimum alternate tax under section 115JB of the Income Tax Act.
- As per the Section 10AA of the Income Tax Act, 100% Income Tax exemption on export income for SEZ units for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years.
- Exemption from Service Tax.
- Exemption from Central Sales Tax.
- Exemption from State sales tax and other charges as extended by the respective State Governments.
- Single window clearance for Central and State level approvals.
Incentives for SEZ Developers
The major facilities and incentives available to Special Economic Zone developers consist of the following.
- Exemption from customs or excise duties for development of Special Economic Zones for authorized operations approved by the BOA.
- Exemption from MAT (minimum alternate tax) u/s 115 JB of the Income Tax Act.
- Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act.
- Exemption from Central Sales Tax (CST).
- Exemption from dividend distribution tax u/s 115O of the Income Tax Act.
- Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).
SEZ ACT 2005 Rules
Let us take a look at the Special Economical Zone Act 2005. Learn the essentials of SEZ Act Rules.
|2.||Procedure for establishment of special economic zone.||Chapter II|
|3.||Procedure for establishment of a unit.||Chapter III|
|4.||Terms and conditions subject to which entrepreneur and developer shall be entitled to exemptions, drawbacks, and concessions.||Chapter IV|
|5.||Conditions subject to which goods may be removed from an exclusive economic zone to the domestic tariff area.||Chapter V|
|6.||Foreign exchange earning – requirements and monitoring.||Chapter VI|
Special Economic Zone | SEZ Forms
Download all Special Economic Zone Forms for Applications for SEZ Set up, approval for SEZ developer bonds etc.
|1.||Application for setting up of Special Economic Zones.||Form A|
|2.||Letter of approval for SEZ developer.||Form B|
|3.||Letter of approval for providing infrastructure facilities in SEZ.||Form C|
|4.||Bond-cum-Legal undertaking for developer.||Form D|
|5.||Quarterly & Half-yearly report for SEZ developer or Co-developer to be furnished to the development commissioner.||Form E|
|6.||Application for setting up of units in SEZ.||Form F|
|7.||Letter of approval for a Unit.||Form G|
|8.||Bond-cum-Legal undertaking for special economic zone unit.||Form H|
|9.||Annual performance report for units.||Form I|
|10.||Appeal Form.||Form J|
|11.||Permanent Identity Card form.||Form K|
|12.||CST Exemption to units in SEZ.||CST Form|
|13.||Application form for issue / modification in importer-exporter code number (IEC).||Form ANF 2A|
|14.||Bank Certificate of payment for the domestic supplier.||Appendix 22B|
|15.||Form of legal agreement for EOU.||Appendix 14-I-F|
|16.||Reimbursement of CST claim.||Appendix 14-I-I|
|17.||Guidelines for sales of goods in DTA.||Appendix 14-I-H|
|18.||Guidelines for an exit of the EOU / SEZ units.||Appendix 14-I-L|
|19.||Guidelines for revival/exit of sick EOU / SEZ units.||Appendix 14-I-M|
|20.||Proforma for extension of LOP for export oriented units.||Appendix 14-I-N|